Making a difference one message at a time...

April 27, 2018

The median value of a US home rose 8% to $213,146 while inventory shrunk by 9%

The U.S. housing market narrowed by 9 percent over the past 12 months, with the majority of available inventory out of reach for all but the highest earners, according to a new Zillow report.

With inventory in decline since 2015, home hunting this summer is expected to be among the most competitive seasons on record, with only about 22 percent of the available stock of 1,224,336 homes priced for first-time homebuyers, according to Zillow’s March Report.

Home values nationwide have risen 8 percent year-over-year since March 2017, to a median of $213,146, with more than 51 percent of all available homes now priced on the high end, according to Zillow, which defines that category as home prices hovering around $375,000.

“This year’s home-shopping season is shaping up to be even crazier than last, and sadly, the group that will have the hardest time is first-time and lower-income homebuyers,” said Zillow Chief Economist Svenja Gudell on Thursday. “These buyers will be competing for the few entry-level homes on the market, which are also the ones appreciating the fastest because of extremely high demand.”

Source: Zillow

Although cities such as Washington and the Dallas-Fort Worth metro area did experience an inventory spurt, the overall national trends show that those who want to buy an affordable home are in for a challenge. “There are some signals a shift may be coming — construction activity is at its highest point in a decade — but buyers shouldn’t hold their breath,” said Gudell.

Texas has its tightest housing supply in almost three decades, just as the spring/summer home buying season kicks off. In February, there was a 3.1-month supply of new and preowned houses listed for sale across the state — the lowest inventory in 28 years, according to a report from the Real Estate Center at Texas A&M University. "Existing homes have been in short supply for a while," center research economist Luis Torres said in the report. "The big difference is now the shortage of new homes is more pronounced." The supply of homes available for purchase is even tighter in North Texas. In February, there was only a 2.7-month inventory of preowned, single-family homes listed for sale with area real estate agents. There was a 2.2-month inventory of completed but vacant new houses available in Dallas-Fort Worth at the start of 2018. A balanced home market is considered to have a six-month supply of available homes. The number of preowned homes for sale in North Texas has increased about 6 percent so far in 2018 compared to 2017. But most of the gain has been in higher-cost houses. More affordable homes, priced below the median price of $250,000, are increasingly in shorter supply.

Do you have a need for speed? Experience the heart-racing thrills of Bike the Bricks as criterium racers from all over the nation battle it out on the bricks and tight turns of Historic Downtown. Spectators are merely inches from the action as riders rocket past powered only by their legs and protected from the pavement only by their skill. Bring the whole family to enjoy food, spirits and festivities at this free cycling event in Historic Downtown McKinney.

The event will include interval races along with activities, live entertainment, food and drink. Cyclists will square off and chase a $25,000 purse.

Inventory shortages have become one of the defining trends of the housing market in recent months. Demand for homes is skyrocketing, but lack of sufficient supply is driving high home prices ever higher, forcing some homeowners to stay in their current homes, thus exacerbating the problem even further. With the latest installment of its proprietary Potential Home Sales Model. First American Financial Corporation has taken a closer look at some of the factors aggravating the housing shortage.

For the month of March 2018, First American, a global provider of title insurance, settlement services, and risk solutions for real estate transactions, reports that potential existing-home sales increased to a 6.04 million seasonally adjusted annualized rate (SAAR). This represented a 0.3 percent increase over February 2018’s numbers and a 61.8 percent increase over the market potential low point measured in February 2011.

First American reports that the market potential for existing-home sales also increased by 3.4 percent year-over-year in March, representing an increase of 201,190 (SAAR) sales. Potential existing-home sales are currently at 1.25 million (SAAR), according to First Am, putting them 17.1 percent below the pre-recession peak of market potential that occurred in July 2005.

Putting those numbers further into context, First American finds that the market for existing-home sales is underperforming its potential by 4.5 percent or an estimated 273,000 (SAAR) sales. That gap increased by an estimated 22,700 (SAAR) sales between February and March.

“The lack of supply is the primary culprit,” said Mark Fleming, Chief Economist at First American. “The inventory of homes for sale in most markets remains historically tight, yet demand continues to rise as millennials further age into homeownership. Limited supply and rising demand means house prices are surging, so why aren’t more existing homeowners selling their homes?”

Fleming points to two phenomena in particular. First, many borrowers are “rate locked,” meaning they are hesitant to leave their current home when finding a new one will likely involve a higher interest rate than what they currently have. “There is limited incentive to sell when, due to higher mortgage rates, it will cost you more each month just to borrow the same amount from the bank,” Fleming said. “As mortgage rates rise further, more existing homeowners may become rate locked into their existing homes.”

Second, the supply limitations are also minimizing existing homeowners’ motivation to sell because there’s no guarantee they’ll be able to find a new home that meets their needs or desires.

“Potential sellers face a prisoner’s dilemma,” Fleming said, “a situation in which individuals don’t cooperate with each other, even though it seems in their best interest to do so. If sellers all choose to sell, they would all benefit as buyers because they would increase the inventory of homes available and alleviate the supply shortage. However, the risk of selling if others don’t in a market with a shortage of inventory prevents many existing homeowners from selling. The result is prices are further bid up by competition for the increasingly short supply.”

First American’s Potential Home Sales Model “measures existing-homes sales, which include single-family homes, townhomes, condominiums, and co-ops on a seasonally adjusted annualized rate based on the historical relationship between existing-home sales and U.S. population demographic data, income, and labor market conditions in the U.S. economy, price trends in the U.S. housing market, and conditions in the financial market.”

Female homebuyers are on the rise. In a study that analyzes the U.S. Census’ Current Population Survey from 1981 until 2017, Veritas Urbis Economics found that the rising population of homebuyers are not young and male, but are older and female.

In 1981, female homebuyers were just 18.9 percent of all buyers. By 2017, that number had risen to 46.4 percent. These aren’t just women with families either: in 1981, just 9.1 percent of buyers were single women. That number grew to 18.9 percent in 2017.

Veritas Urbis Economics notes that these demographic shifts are likely due to the increasing number of educated women. In 1981, just 11.1 percent of women held a bachelors degree, while 25.1 percent of women have a degree now. Additionally, more women are working now compared to 1981. The percentage of women at work increased from 35.3 percent in 1981 to 42.5 percent in 2017.

Additionally, an increasing number of these homebuyers, men and women alike, are childless. The share of childless home buyers hit an all-time low in 2017, at 40.7 percent, down from 51.4 percent in 1981. Not just childless buyers either: single person households increased from 15.3 percent in 1981 to 21.2 percent in 2017. However, the share of all households made up of childless households fell by 20.4 percent, which Veritas Urbus Economics notes imply that the trend towards increasing childless homebuyers represents a broader demographic twin.

Many of these buyers are in the 55+ range, a drastic shift from 1981. The share of homebuyers made up of households aged 55 and over has grown to 27.8% in 2017 from just 16.1% in 1981. Meanwhile, 35 and under buyers are dropping, falling to 33.7% in 2017 from a high of 52% in 1981. The 35-54 year old demographic makes up the highest percentage of homebuyers, jumping by 20.5 percent since 1981.

A new Frisco residential development that's planning more than 3,000 homes and apartments will open its first phase this summer. The 735-acre Grove community, on Main Street west of Custer Road, is being built in partnership with Newland Communities and North America Sekisui House LLC, a Japanese builder. The companies bought the land in 2016. Home will be priced from the $400,000s to the $700,000s. American Legend Homes, Drees Custom Homes, Highland Homes and Southgate Homes are building in The Grove. The community also includes a farmhouse with a café and bakery, a fitness center, pools, 4.5 miles of nature and neighborhood trails, and a dog park. The Grove property is planned to have 1,800 homes and 1,400 apartments, plus retail and office space. Newland is based in San Diego and has more than 140 developments in 13 states completed or under construction. The company has developed portions of the Stonebridge Ranch community in McKinney since 2003.

Dallas-area home prices rose at the slowest rate in six years in the latest nationwide housing market comparison. Dallas home prices were 6.4 percent higher than in February 2017 in the monthly Standard & Poor's/Case-Shiller Home Price Index. The Dallas-area gain was just barely ahead of the nationwide average price increase of 6.3 percent in February from a year earlier. Dallas-area home price gains have been moderating since last year. Higher mortgage rates and a larger supply of houses on the market have slowed the appreciation rate in some North Texas neighborhoods. Still, North Texas' median home price is at a record high of about $260,000. Increasing employment supports rising home prices both nationally and locally," Blitzer said. Dallas-area home prices are more than 60 percent higher than they were during the worst of the recession in 2009. And Dallas prices are almost 45 percent ahead of where they were at the peak of the last housing market in 2007, according to Case-Shiller.

Dallas-Fort Worth homes was one of the fastest-selling home markets in the country last year. And the pace of local home buying is expected to remain rapid this year, according to analysts with Zillow. With an average home sales time of just 55 days, North Texas ranked sixth nationally in 2017 among markets with the shortest selling time. Nationwide it took on average more than 80 days to sell a house in 2017. "As demand has outpaced supply in the housing market over the past three years, buying a home has become an exercise in speed and agility," Zillow senior economist Aaron Terrazas said in the report. "This is shaping up to be another competitive home shopping season for buyers, who may have to linger on the market until they find the right home but then sprint across the finish line once they do." While the nationwide inventory of homes for sale has fallen on a year-over-year basis for 37 consecutive months, Zillow said that D-FW home listings are 15 percent higher than a year ago. The typical U.S. buyer spends more than four months searching for a property and makes at least two offers before buying. Last year, 40 percent of homes sold in the D-FW area fetched more than their listing prices, according to Zillow. Nationwide, just 25 percent of houses went for higher than the original asking price.

More than half of Dallas-area neighborhoods saw a decline in home purchases in early 2018 after years of rising sales. The largest decreases in sales came in high-priced neighborhoods in Colleyville (-30 percent), the Park Cities (-28 percent), Fairview (-26 percent) and Northeast Dallas including Lake Highlands (-20 percent). Median sales prices were $400,000 and more in each of these neighborhoods that saw the most significant first-quarter declines, according to data from the Real Estate Center at Texas A&M University and the North Texas Real Estate Information Systems. "We are definitely seeing a slowdown in appreciation at the higher end," said housing analyst Paige Shipp with Metrostudy Inc. "We are seeing more demand at the lower price points. She said more than 60 percent of the preowned homes sold in the area were priced below $300,000. Sales of the most expensive million-dollar-plus homes were down by 5 percent in the first three months of 2018. Purchases of houses priced between $190,000 and $300,000 were up from 15 percent to 18 percent in the first quarter.